SLIDE 16 16
Reconciliation to GAAP Metrics
Non-GAAP Financial Measures We define Adjusted EBITDA as net income (loss) plus interest expense, income tax expense (benefit) and depreciation and amortization, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as non-cash equity compensation, other income and other non-cash, non-recurring items, if applicable. We define Adjusted EBITDA attributable to Hess Midstream Partners LP as Adjusted EBITDA less Adjusted EBITDA attributable to Hess Infrastructure Partners’ retained interests in our joint interest assets. Although we have not quantified distributable cash flow on a historical basis, we intend to use distributable cash flow to analyze our liquidity and performance. We define distributable cash flow as Adjusted EBITDA attributable to Hess Midstream Partners LP less cash paid for interest and maintenance capital expenditures. Distributable cash flow will not reflect changes in working capital balances. Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our combined financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
- ur operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of
Adjusted EBITDA, financing methods;
- the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
- ur ability to incur and service debt and fund capital expenditures; and
- the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of Adjusted EBITDA and distributable cash flow provides useful information to investors in assessing our financial condition and results of
- perations. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income (loss), income (loss) from operations, net cash
provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Adjusted EBITDA or distributable cash flow should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following tables present a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, for each of the periods indicated.
(1) Noncontrolling interest has been calculated as if Hess Midstream had owned its assets for the entire first half of 2017. (2) Assumes no maintenance capital expenditures during the periods presented. Under our contribution agreement, Hess Infrastructure Partners agreed to bear the full cost we expect to incur for maintenance capital projects during the three months ending September 30, 2017 and six months ending December 31, 2017. (3) Cash interest paid is expected to be less than $1 million.
Hess Midstream Partners LP Predecessor Historical Hess Midstream Partners LP Historical Estimated Six Months Ended Six Months Ended Six Months Ending (in millions) June 30, 2016 December 31, 2016 June 30, 2017 December 31, 2017 Net Income $ 86.9 $ 119.4 $ 131.2 $ 141 - 146 Add: Depreciation expense 47.4 52.3 55.3 58 Add: Interest expense 1.4
1 Adjusted EBITDA $ 135.7 $ 171.7 $ 187.0 $ 200 - 205 Less: Adjusted EBITDA attributable to Hess Infrastructure Partners(1) 168.4 161 - 165 Adjusted EBITDA attributable to HESM $ 18.6 $ 39 - 40 Less: Maintenance Capital Expenditures
(2) & Cash Interest (3)
0.2
- Distributable Cash Flow of HESM
$ 18.4 $ 39 - 40
